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Monthly Archives: March 2015

The Department of Education took a step in the right direction February 27th when it wound down contracts it had with five debt collection companies that, since 1997, have been hired to do the work of collecting on federal student loan repayments. The contracts were ended because the Department found that the companies—Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery (Navient’s debt collection arm), and West Asset Management—were providing inaccurate information to borrowers at unacceptable rates.

Since borrower counseling is not the specialty or mission of these loan collection companies, this is unfortunately not all that surprising. [See National Consumer Law Center’s report on the government’s relationship with debt collection agencies in the student loan arena, which discusses this inherent conflict in responsibilities.] In this instance, the Department terminated the contracts after concluding that borrowers had been misled regarding the loan rehabilitation program, which is an option that can help defaulted borrowers who agree to make a certain number of on-time payments. Borrowers were specifically misled regarding how such a program could benefit their credit rating and also about the waiving of certain collection fees. Along with terminating the contracts, the Department announced that it would be issuing enhanced guidance for the remaining collection agencies, increasing training, and expanding monitoring for these types of issues.

Navient, whose subsidiary Pioneer Credit Recovery was one of the groups terminated, has a record of misleading student loan borrowers. In 2006, the Department of Justice and the FDIC found that Sallie Mae/Navient was overcharging 60,000 active-duty servicemembers on their student loans, and handling their payments in a manner that maximized late fees. And In November of last year the CFPB issued a Civil Investigative Demand to Pioneer Credit Recovery, as part of an investigation regarding the company’s work collecting defaulted student loan debt.

Much more change is needed in this area: student loan debt collectors that make a practice of misleading or hurting consumers should be held accountable, and companies that work to collect loan debts on behalf of the federal government should be required to respect borrowers’ rights and to provide them with accurate information.

The eight million job losses during the Great Recession triggered by the 2008 financial crisis had a devastating impact on working families and underlined the need for effective regulation of Wall Street. Recent studies point out that the growing power of finance drives inequality and the shrinking portion of wealth that goes to wages. With this in mind, the Executive Committee of the AFL-CIO – the nation’s largest labor coalition – reaffirmed its commitment to reforming the financial system, including protecting the progress won in the Dodd-Frank Act.

The statement also calls for further changes that go beyond the Dodd-Frank Act – including shrinking the excessive size of the megabanks, establishing a Wall Street speculation tax, and reinstating Glass-Stegall separations between commercial and investment banking – in order to do more to end the excessive risks that the financial sector poses to the rest of the economy. The AFL-CIO’s commitment to Wall Street reform has been a crucial factor in the gains that reformers have made so far and its engagement will be a crucial factor in future progress.

Last week, I captured a photo of the President, with CFPB architect and now U.S. Senator Elizabeth Warren (MA) directly behind him, as he gave a well-deserved shoutout to the CFPB and its director Rich Cordray (far right) at an event launching a new initative to protect retirement savings against Wall Street tricks.

Today, Consumer Financial Protection Bureau Director Richard Cordray will present the CFPB’s sixth Semi-Annual Report to Congress at a hearing of the full House Financial Services Committee (2:30 PM ET), whose majority members have often been harsh critics of the successful consumer agency… [P]owerful special interests, including the banks and credit unions and their many trade associations, as well as payday and high cost lenders, financial services lawyers and lobbyists, debt collectors and credit bureaus, mortgage companies, for-profit trade schools and auto finance companies, joined by generally coin-operated “free market” think tanks and other special interests, continue to try to rev up Congressional opposition to the CFPB.

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This blog is maintained by AFR as a forum for ongoing news and commentary about the fight for effective financial reform. Blog posts represent the opinions of their authors / posters, and do not necessarily represent the views of the AFR coalition or coalition members.